What is a Businessowner's Policy?

 

Generally designed to appeal to small and mid-sized businesses, a business owner's policy (BOP) is insurance coverage consisting of several policies combined into one.  The advantage of buying a BOP is that it's a collection of policies protecting a business owner from the various property and liability risks most businesses face and it's sold at a discount from what you'd pay to assemble all the included protections separately.  These may include:

• Property damage or destruction from various named perils
• Liability protection
• Business interruption protection

Although coverage offered may vary from one insurer to the next, you may usually opt to add additional coverage to the basic BOP being offered with:

• Crime protection
• Protection against merchandise spoilage
• Protection against forgery and more

Qualifications 

Individual insurance providers decide if a business qualifies for a BOP, determined by such factors as: 

• Business location
• Size of business location
• Class of business
• Revenue

BOP Requirements

Not every business qualifies for a BOP and each insurance provider has its own requirements.  Many providers, for example, will only consider writing BOPs for companies that handle all their business operations on-premises.  There may also be limitations on business size, with primary business locations required to fall within certain size parameters.  Business classes that typically qualify for a BOP include:

• Apartment buildings
• Retail operations
• Office-based businesses
• Small restaurants

Certain businesses may qualify for what are known as "special considerations," to be determined between the insurer and the insured.  These may include additional coverage for mechanical breakdowns and computers.  BOPs typically do not cover worker's compensation, health insurance or disability insurance.  Coverage for these require separate policies.

Understanding Basic BOP Protections

A breakdown of the three basic protections found in a BOP include:

1. Property Insurance - Similar to homeowners insurance, the property insurance portion of a BOP covers the structure of the business property against losses from a list of named perils such as fire, lightning, explosions, storms, smoke, vehicle or aircraft damage and more.  Coverage also extends to any business-related property found within the covered business.  
2. Business Interruption Insurance - coverage against loss of income caused by a peril covered in the policy that disrupts business operation.  May also include expenses incurred from operating business from a temporary location.
3. Liability Protection - protection against losses from bodily injury or property damage caused by your business during normal business operations.  Could be damage from faulty installations or defective products.

4 Tips for Preventing Small Business Insurance Claims

 

Small business owners are responsible for many things geared toward making their business a success and, as a small business owner, you're responsible not only for increased sales and cost reductions but also for managing risk.  A big part of managing risk is to be covered by a comprehensive small business insurance policy that protects you from suffering a variety of losses, one of which may be liability lawsuits.

Your Greensboro small business insurance policy is absolutely something you want to have but also something you never want to have to use.  Without proper protection, however, a serious claim against your business could essentially close down your complete operation.  But smaller claims such as those for a slip and small injury, which is one of the most common, or theft of merchandise or equipment, are not only troublesome but can cost you money in the form of higher premiums.

Tips for Preventing Small Business Insurance Claims

Here are some things you can use to help prevent small business insurance claims:

1. Burglary and theft are the most frequent causes of property loss claims submitted by small businesses, accounting for about 20% of all claims filed.  The best way to mitigate these losses is to introduce some simple security measures such as sturdy locks for all doors and windows and also for any sensitive areas.  High-quality electronic surveillance equipment can be used to guard your business both during and after business hours.  If your employees make bank deposits, it's a good idea to incorporate the buddy system.  Employee dishonesty can be countered by providing a good working environment and fostering high employee morale.
2. Slip-and-Fall Injuries are some of the most common injuries for which claims are made against small businesses.  The more foot traffic your business has, the more vulnerable you are to facing this liability claim.  Good housekeeping is a primary factor in avoiding these injuries.  Inspect for and repair any loose steps or handrails.  Slippery floors should be well marked and any clutter should be avoided.
3. Other injuries caused by unstable product displays or heavy goods falling from high shelves may be alleviated by regular inspections to prevent these problems.
4. Businesses that use vehicles as part of doing business can be held liable if one of these vehicles becomes the cause of an injury or property damage.  Only qualified persons should operate these vehicles and regular driver training should be provided.  

Can Business Insurance Be Written Off?

 

We sometimes hear questions from businesses here in the Greensboro area regarding business insurance and whether or not it can be written off your taxes.  According to the IRS, expenses are fully deductible, including insurance premiums, if they fit the following criteria:

1. The business must be operated "for profit"
2. The insurance costs being deducted must be for insurance that is "both ordinary and necessary"

An ordinary business expense is one that's commonly accepted in your industry.  A necessary business expense is one that's viewed as being appropriate and helpful for your business.

Business Insurance Premiums

According to the IRS, as a business owner, you can deduct the the necessary and ordinary cost of insurance premiums if the insurance is for your business.  There are a number of common business insurance policies that qualify, including:

• General Liability Insurance
• Professional Liability Insurance
• Commercial Property Insurance
• Data Breach Insurance
• Workman's Compensation Insurance and more

These are all policies designed to help protect your business and, if they are considered necessary and ordinary in your particular industry, then the full costs are likely deductible.

Seek a Tax Professional

There are a number of business insurance costs that may be tax deductible and certain policies don't qualify as being deductible.  The best advice is to seek the counsel of a tax professional to determine the difference.  This will help take the guesswork out of which insurance you carry and which are considered actual business expenses.  

If the insurance coverage you want to write off isn't considered necessary and ordinary by the IRS, then they won't consider it a business expense and it can't be written off.  The following types of insurance generally cannot be written off:

• Policies that are designed to help cover lost earnings due to disability or illness
• Life insurance policies
• Self-insured reserves
• Policies taken out to help secure a loan

Business vs. Personal Expenses

While there is no allowance for deducting personal or living expenses, some things used for business and personal use may be partially deductible on your taxes.  An example of this would be your car insurance if you use your car for both personal and business use.  Keeping track of your mileage, you can calculate the percentage you've used your car for business during the year, then at tax time deduct that percentage of your insurance premium cost.  Business use of your home may also provide a partial deduction.

Is It Hard to Get Small Business Liability Insurance?

 

Small business liability insurance is protection no small business owner should be without, especially in a litigious society such as the one we're living in here in the U.S. A single injury that one of your customers or employees suffers could spell financial disaster to your business without some good small business liability insurance to help cover the cost of a liability suit.

Getting Small Business Liability Insurance

Small business liability insurance is easy to obtain and is offered by most insurers selling business insurance. There are numerous types of business liability insurance, including:

• General Liability Insurance, which protects you against financial losses resulting from lawsuits stemming from bodily injury, property damage or slander, and for costs associated with legal defense and judgements.
• Product liability Insurance, which protects you from financial losses resulting from lawsuits stemming from defective products causing property damage or bodily injury.
• Professional Liability Insurance, which protects you from financial losses resulting from lawsuits stemming from claims of malpractice, errors, omissions or negligence.

Steps to Buying Small Business Liability Insurance

There are some basic steps you can take to get your business liability insurance. Start with a clear assessment of what types of risks your business faces. What kinds of accidents or lawsuits could be damaging to your company?

Contact a well-regarded, licensed commercial agent who can recommend coverage that best matches your insurance needs. Use an independent agent with access to a number of different insurers and let them offer you at least three insurance options. Compare the different terms, rates and benefits and pick the policy that best suits your particular insurance needs. After a year, re-access your business insurance needs and upgrade as needed.

Home-based Businesses

• A small home-based business, operated out of your personal home, can be protected for a small amount of business property loss and liability claims by adding a rider to your existing homeowners policy. The amount of liability coverage you need will depend partly on whether or not you have clients or customers coming into your home to conduct business. An umbrella policy can be added to your coverage for increased liability coverage. These policies are reasonably priced and add coverage to your existing liability protection.

What Is a Certificate of Insurance?

A Certificate of Insurance, or COI, is a document issued by your insurance company to provide proof of insurance coverage. A COI not only verifies the existence of current insurance coverage but also recaps the basic conditions and key aspects of the policy. A standard Certificate of Insurance includes these details:

• Policyholders name
• Policy's effective dates
• Type of coverage
• Policy limits

Who Needs to Have a Certificate of Insurance?

A COI is similar to a Proof of Insurance card for your vehicle – something you may be required to produce if you're ever pulled over by the police or involved in a car accident. A COI is something you'll want to have on hand if you're involved in a business that provides a service or performs work where there's a potential for being held liable.

In reality, every business out there needs to have business insurance in place, especially liability coverage, but not every business owner will be called on to produce their COI as proof of their insurance coverage.

More likely, companies that do jobs outside of their office should have a COI on hand, ready to show to a customer hiring them or considering having them do some work. If, for example, you're hiring a local company to reroof your home or to build a backyard fence, you want to know they have the ability to cover the cost of a liability claim.

Anyone you hire to do work where someone could get injured or lose money should be insured, and asking for a look at their COI will be evidence of said insurance. If they can't produce this proof of insurance, you may be better off hiring someone who can.

A contractor undertaking a significant job should have a current COI, and any subcontractors hired for the job should also be able to produce proof of insurance.

Reasons Why Certificates of Insurance are Important

• A COI summarizes your insurance status on one simple form, without the need to produce an entire insurance policy. Often, companies seeking bids will require one as part of the bidding package.
• Carefully documenting the insurance coverage of your subcontractors and third-party vendors covers your need of having essential insurance coverage to protect yourself in the event that something goes wrong.
• A COI is a convenient way of proving you're insured and can save you time and trouble when seeking jobs.

7 Common Business Insurance Claims

Whatever type of business you're in, one undisputed necessity in running a successful business in Greensboro is the protection provided by quality Greensboro business insurance. When business owners purchase a business insurance policy it's likely not in anticipation of suffering a loss that may occur in the daily running of a business, but more for some catastrophic event such as a fire that will totally devastate their business.

While it's true these types of disasters should be properly protected against with quality insurance coverage, there are numerous smaller risks that businesses face in their day to day activities. It may surprise you to learn what types of losses are most prevalent to most businesses on a regular basis, especially smaller businesses.

The Most Common Business Insurance Claims

A nationally recognized property insurer conducted a study in 2015 consisting of a compilation of claims information submitted by more than one million small business policyholders over a five-year period of time. According to this study, it was estimated that approximately 40% of all small businesses will experience some type of loss, either liability or property, within a 10-year period.

Following are the most common types of claims submitted by small businesses:

1. Burglary/Theft – making up a full 20% of annual business insurance claims, burglaries and thefts may be perpetrated by dishonest employees or by outsiders. These claims include not only the cost of lost products and merchandise, but also the cost of damages suffered by break-ins.
2. Water and Freezing Water Damage – accounting for about 15% of annual business insurance claims, these claims may involve roof damage, broken water pipes or a leaking appliance such as the water heater.
3. Wind/Hail Damage – accounting for another 15% of claims, wind and hail damage can affect your structure, out buildings, automobiles and outside equipment.
4. Fire – causing about 10% of business claims, fire damage can be considerably destructive and expensive to remedy.
5. Slip and Fall Injuries – making up about 10% of business insurance claims, add to this another 5% for injuries caused by something other than a slip and fall such as a heavy object falling off a shelf and hitting someone's head.
6. Reputational Harm – your Greensboro business insurance policy covers you against slander and libel claimed by a third party as damaging to their reputation.
7. Product Liability – representing less than 5% of claims, these claims can be extremely expensive.